How AI Can Secretly Drive Massive Profits for the Casino Industry

• Casinos have been slow to join the AI revolution, trailing behind other major sectors
• Embracing algorithms over old tech is expected to unlock a major avalanche of future earnings
• Operators are actively testing AI for hyper-personalized player rewards and dynamic hotel pricing

The casino industry may be late to the artificial intelligence (AI) revolution, but its delayed embrace of the technology is setting the stage for a massive jackpot in long-term profits.

Clayton Peister of Differential Labs, a company that works with land-based casino and iGaming operators on AI adoption, recently joined Truist Securities analyst Barry Jonas to discuss AI trends in the gaming industry.

There were two clear takeaways from the conversation: the AI/gaming intersection is still in its infancy, but when it matures, it could stoke massive earnings before interest, taxes, depreciation and amortization (EBITDA) growth.

Net-net, most early AI initiatives haven’t yet reached their potential as operators have focused largely on technical wiring rather than vision,” observes Jonas. “Over time, Mr. Peister sees a real opportunity for AI to unlock ~20-30% EBITDA upside for both land-based and digital casinos.”

Unleashing that earnings growth potential is a different matter.

Casino Industry Needs to Bridge AI Gaps

Gaming companies have multiple ways of deploying AI, and while that versatility is a plus, the industry needs to close some chasms to harness the true potential of the technology.

“Peister stated that the industry has tried and failed to adopt AI by forcing the line-level team to radically change process, but through LLMs, Differential Labs are adapting the AI to the existing processes,” notes Jonas. “Net-net, LLMs working with machine learning brings the 10-20% EBITDA uplift within reach.”

The Differential Labs is executive said LLMs can improve casino operators’ real-time marketing, risk management, asset optimization, patron-level strategy and reinvestment objectives — all of which can pave the way for increased EBITDA.

Legacy Systems Hinder Casino AI Efforts

Some asset-light gaming companies, including DraftKings (NASDAQ: DKNG) and FanDuel owner Flutter Entertainment (NYSE: FLUT), are already emerging as AI adoption leaders and there’s evidence suggesting some casino operators in Asia are making AI strides.

In the US, realizing earnings upside and other AI benefits is undoubtedly attractive to land-based operators, but they’re contending with headwinds created by legacy management systems.

“A significant implementation moat exists due to legacy Casino Management Systems (CMS) and market-specific regulatory constraints. Existing CMS frameworks are frequently static and highly regulated, forcing innovative operators to build an ecosystem of applications around the core to bypass data bottlenecks,” notes Jonas.

In the Truist discussion, Peister noted US-based casino operators are currently largely focused on AI is a labor cost savings tool, but that could change over time as those companies increasingly leverage cloud computing technology.